Beyond the numbers

How urban households in Central America responded to the recent global crises

Manuel A. Hernandez, Miguel Robles, Maximo Torero
issue brief

A review of various economic indicators shows that both the recent food crisis and the financial and economic crisis have had significant negative effects on the Central American countries. The first jolt to the region came in 2007 and mid-2008, while the second occurred at the end of 2008 and in 2009. Particularly notable during 2007 and the first half of 2008 was the inflation that hit the food and beverage sector, which consistently outpaced overall inflation in Central America. The rise in prices coincided with the upward trend in international prices for the main agricultural commodities. The impact of the financial and economic crisis was reflected in declining exports, particularly for the maquila industry, reduced tourist inflows, a decrease in remittances from abroad, and a decline in flows of foreign direct investment (FDI) to the region. These factors, in combination, contributed to a contraction of economic activity in Central America in 2009.